Most must have read this superb piece from Arvind Subramaniam. He points to some initial results from his ongoing research on Indian economy.
- First growth in states has been double in 2001-09 compared to 1990s.Barring HP and Rajasthan, all states show higher growth
- However divergences in growth patterns continue. Inequality between laggard and frontrunner states remains and inequality has actually increased.
- Interestinlgy globalization has caught up with states as well. In this crisis, Maharashtra, Karnataka etc were impacted more than say Bihar and Gujarat. Globalisation works both ways…
- Finally, to the topic of the post. He says states with better demographics and having younger population (like Bihar, UP etc) fared worse than older states of Karnataka, Maharashtra etc. He says:
Hope in India’s future growth is founded on the demographic dividend: a rapidly expanding young population will save more and inject entrepreneurial vigor that will lift the country to a faster growth trajectory. And corroborative evidence was provided in an excellent recent paper by Shekhar Aiyar and Ashoka Mody of the International Monetary Fund. But the pattern of growth in the 2000s appears to muddy the waters. Our preliminary analysis, based on the 2001 Census projections rather than actual data from the 2011 Census, suggests that key demographic factors such as changes in the share of working-age population are not correlated—they may indeed be negatively correlated—with growth performance. This may not be surprising given that many of the demographically aging states such as Kerala, Tamil Nadu, and, to a lesser extent, Maharashtra and Gujarat have done remarkably well while demographically dynamic states such as Uttar Pradesh, Rajasthan and Madhya Pradesh have not fared as well. The preliminary nature of these results must be stressed, but succumbing to a demography-based complacency must be resisted.
Shankar Acharya said the same thing
in a 2004 paper. He said demographic dividend is questionable as laggard states have higher fertility rates. So not much has changed. I wrote the post in 2007 (just started blogging then) and seems so relevant even now.
This demographic dividend thing has been overblown. It is like you assume if there is demand and supply markets would be efficient. So as India has favorable demographics, it will grow. Well, like to markets efficient you need many things (infrastructure, institutions, law etc) you need the same for demographics as well – education, healthcare etc. The moment you look at these, you know we actually could be in for demographic discount.
He also points to some interesting aspects of communist regimes in two states – West Bengal and Kerala.
The figure provides a clue both to the long-standing success of the Communist party in West Bengal and its overthrow in the recent elections: West Bengal was one of the strongest performers in the 1990s but was one of the few states that stagnated in the 2000s while others surged.
A final intriguing factoid relates to Kerala. The conventional wisdom is of a state that is Scandinavian in its social achievements but sclerotic in its growth performance because of investment-chilling labor laws and militant trade unions, and reflected in a labor force that has voted with its feet by emigrating to West Asia. The abiding caricature is of the lazy, argumentative Malayali, discussing Foucault and Gramsci over endless cups of chai while living parasitically off the remittances sent by the relatives-in-exile. Well, the data suggest that the conventional wisdom and the caricature are dead wrong. Kerala posted amongst the highest rates of growth in the 1990s (4 percent per capita), continued its stellar performance in the go-go 2000s (7.5 percent), and exhibited great resilience during the crisis, experiencing virtually no decline in growth.
Well…what can one say to this?
along with this article gives a nice glimpse into India’s states economic performance.